Life can be stressful if you have fallen behind on your debts. In fact, the tensions increase when you find the debts mounting because of late payment fees and interest rates. Very soon you fall inside a hole that seems difficult for you to come out of. In such a situation, the only option you have is debt settlement. Here, you offer your creditors a lump sum of money for writing off the remaining portion of your debts. In most cases, the creditor agrees, however, this might not be the case for every creditor.
Understanding the strategy, you should embrace for debt settlement
In order to clear your debts, you must first gather information about it. First, find out when you first went bankrupt. You need to gather all the information about your debt like the amount you owe- this includes the principal amount, the late fees and the interests charged, the current owner of the debt, the default date, etc. If you have many debts that you need to pay, it is crucial for you to categorize them as all debts are not similar. The following are the primary categories via which you can divide your debts-
Categories of debts
It is important for you to know about the different kinds of debts available in the market. This knowledge will help you in categorizing the debts and paying them off as soon as possible.
Secured debts- This kind of debt needs collateral- this loan is like your home loan or a car loan.
Unsecured debts- This debt includes your personal loans, credit card, and medical debts. Here, you do not have to produce collateral to get the debt.
Non-negotiable debt- Debts that fall under this category are payments for child support and child custody. These are some debts that are non-negotiable, and student loans fall under this category as well.
Create a schedule for the payments of your debts
When you wish to repay debts, you need to make a list of the debts that you owe. It is important for you to prioritize debts first. It is obvious that you cannot repay all your debts. You should make a list of the debts you are willing to pay and the debts you are willing to settle. Since you have a tight budget, it is not possible for you to repay all your debts on time. You must decide on the debts you wish to pay first. Experts in the field of debt repayment and settlement suggest you prioritize your debts in the following ways-
- Pay off debts that are non-negotiable-You should pay attention to debts that are non-negotiable. Debts like student loans should be revised. Check their terms and conditions and see if you can revise them. The same also applies to child support and any kind of alimony payments you make. You have the option to reduce your child support, and alimony payments as this will free up some money for you to pay back.
- Repay your secured debts-When it comes to the repayment of debts, make sure you repay your secured debts second in the list. Search for companies that focus on debt settlement online. Allow the experts to talk with the creditors so that you can enter into a negotiation with them. In order to get the best debt settlement company for your needs, compare them online. Search for customer reviews and testimonials so that you can get an idea on the company before you hire experts to manage your case. Read debt settlement reviews and opt for settlement of your debts less than what they are worth. Pay your mortgage and car loans. You cannot afford to lose your home and retaining your car helps you to get to work regularly.
How old is your debt?
Check how long ago did you take the debt. Some of them are so old that creditors do not have the legal right to collect them. You should check your paperwork and find out the time you went into default. In case, the debt is very old, then the statute of limitations might not be valid and is expired now. In case, the latter has expired you should not even think of negotiating the debt.
The advantages of credit counseling for the repayment of debts
Besides debt settlement, you might have other options. Here, you must opt for credit counseling where you can meet financial experts to evaluate your situation to help you. You will often find credit counselors at your local university, military base, credit union, etc. Talk to them to get help when it comes to debt settlement. When you meet them to ask them some questions like will debt settlement impact your credit score, is bankruptcy a better alternative than debt settlement, know the differences between Chapter 13 and Chapter 7 and how can you get ahead with your home or car loan.
Consider other options besides debt settlement
Debt settlement is not meant for everybody. There are other options you may consider for the repayment of your debts. Your creditors might agree to reduce interest rates or give you a break for some months so that you do not have to repay the loan. In case you have financial problems that will last for a short period, you can talk with the creditors and create another repayment plan. When you have entered into an agreement, you should create a budget and stick to it. It is crucial for you to know how much you should pay for every month. You can even call credit counselors andwork on a debt management plan. Your counselors will work in tandem with you to help you settle and pay off your debts with success.
When you are talking with debt settlement companies, ensure that you get companies that have positive reviews and testimonials in the market. The experts here will help you understand the agreement so that you can eliminate debts with success.
Marina Thomas is a marketing and communication expert. She also serves as a content developer with many years of experience. She helps clients in long-term wealth plans. She has previously covered an extensive range of topics in her posts, including business debt consolidation and start-ups.